The Islamic Circle of North American (ICNA) is the progeny the Muslim Students Association and the Islamist Jamaat-e-Islami movement. ICNA was previously directed by Ashrafuzzaman Khan, who was convicted in absentia by Bangladesh last year for war crimes committed during that country’s war of independence in the 1970s.
Tariq Farid, founder and CEO of the fruit basket company Edible Arrangements, and trustee of the Farid Foundation, has donated money to ICNA. This revelation comes from the Farid Foundation’s own website and from Farid’s attorney, who wrote last week that, “…the Farid Foundation’s only contribution was to a special fund of the ICNA called ‘ICNA Relief USA’, an organization in New York City, which, among other things, helps women with temporary housing.” The lawyer’s statement was made in response to an article published at Blue MauMau, a website for franchisees.
The Blue MauMau article highlighted a lawsuit filed by former Edible Arrangements controller Tara Perino, who says that Farid maintained a hostile workplace and discriminated against non-South Asians and non-Muslims. The lawsuit also describes the Farid Foundation’s support to ICNA: “Farid and his brother, Kamran Farid (Edible Arrangements' Chief Operating Officer), at all relevant times hereto have been the two trustees of a foundation called the Farid Foundation, operated out of the same location as Edible Arrangements. Farid Foundation makes significant contributions to Islamic causes and organizations, including the Farid Foundation Pakistan; the Salma K. Farid Academy; Islamic Circle of North America Relief; the Muslim Coalition of Connecticut; the Inner-City Muslim Action Network; the Wallingford Islamic Center; Masjid AI-Islam; and the Islamic Association of Southern Connecticut.”
The author of the Blue MauMau article, Corbin Williston, noted that, “The head of ICNA at the time the suit was filed was Ashrafuz Zaman Khan”—the same man convicted of war crimes—and that the argument that the ICNA donation was “only” to a special fund wouldn’t comfort the people whose loved ones were tortured and murdered by Khan.
Indeed, and ICNA Relief USA isn’t exactly a ‘special fund’ anyway. It is a tax-exempt entity operated by ICNA. The statement that ICNA Relief USA provides transitional housing to women may be true, but it is quite misleading in terms of the charity’s primary activities: according to their own last tax return, ICNA Relief USA spent just $580,000 on housing for women out of its total $5 million in annual expenses.
On the revenue side, ICNA Relief USA received a $30,000 grant in 2012 from Helping Hand for Relief and Development, a Michigan-based Islamic charity with links to a Pakistani front charity that funds Hamas.
Tariq Farid’s attorney is doing his best to defend his client against some very damaging claims. But an admission that the Farid Foundation donated money to ICNA Relief USA doesn’t do much to clear the air.
Blue MauMau should be commended for reporting on the lawsuit against Edible Arrangements, and for keeping the article on their website despite the demand from Farid’s attorney to retract the article.
Acknowledgment: Thanks to Paul for alerting me to these developments
Late last week, I published one report in Jamestown Foundation's Terrorism Monitor on the Hizbul Mujahideen’s funding networks and how it fuels Kashmir militancy through its Pakistan based charity arm, JKART. See, “Indian Investigations Reveal Funding System for Promoting Jihad in Kashmir”, Terrorism Monitor (ANIMESH ROUL: Jamestown Foundation:Volume: 12 Issue: 7, April 04, 2014.
Here is an excerpt. For complete article, visit the Jamestown's Website.
"HM and Salahuddin have invested heavily to mobilize popular opinion behind the Kashmir struggle and to find recruits through the provision of relief for the family members of slain militants. For this purpose, HM and its sympathizers have utilized shadow NGOs and educational and humanitarian charities like JKART and the Falah-e Alam Trust to fund militant activities in Kashmir. In 2011, the NIA named two Pakistani nationals affiliated with JKART, chairman Mahboob-ul-Haq and general secretary Masroor Dar, as prime organizers behind monetary transactions the HM operatives carried out in the J&K and Pakistan-administered Kashmir (Indian Express [Mumbai], December 8, 2011).
According to the NIA charge sheet, over $2 million had been channeled into the Kashmir Valley for JKART, an organization used by Hizbul Mujahideen to finance militant activities in J&K (Economic Times [New Delhi], December 1, 2013). Established in the early 1990s, JKART aims to provide health care, food and shelter to Kashmiri families displaced by the conflict. With headquarters in the garrison city of Rawalpindi in the Pakistani Punjab, JKART also has branches in the Pakistani capital of Islamabad and in Muzafarabad, the capital of PAK."
For For Full Text Article Visit http://www.jamestown.org
[Picture Courtsey: Snapshot of Hizb Media, Online Arm of Hizbul Mujhaideen.]
The presence of two Iranians with stolen passports on the ill-fated Malaysian Airlines flight 370 highlighted the ease with which foreign nationals from state sponsors of terrorism can fly with a false identity and gain entry to a NATO country.
Although the men may not have been responsible for the plane crash, the situation raises the question of how often passports are stolen or forged and what threats this presents to the criminals’ purported country of origin.
Interpol says that only three countries in the world screen air passengers against Interpol’s database of stolen passports. Phony passports are a big problem too. Earlier this month, customs officials in Dubai seized 52 fake passports on the way into the U.A.E.
In 2010, ABC News reported, “A decade after the Sept. 11, 2001, terror attacks brought to light the dangers of fake IDs, federal undercover agents are still able to easily obtain genuine U.S. e-Passports using clearly fraudulent information that should have raised red flags at the State Department.” The Government Accountability Office had confirmed previously that obtaining a real passport using fake identification could be done “easily.” More recently, the Daily Mail reported that fake passports can be purchased through the online Silk Road black market.Benefits of a fraudulent passport
Individuals can carry out many activities with a fraudulent passport other than boarding a plane. They can set up bank accounts and apply for credit cards, like one eastern European mob boss did in Canterbury—accounts which he used “to rip off casinos, high street stores, petrol stations and banks.” Hackers can also set up bank accounts in the U.S. from overseas using false passports, and use those accounts as repositories for money obtained as the result of malware attacks, as a case from a few years ago demonstrated.
Basically, obtaining a fraudulent passport allows malicious actors to “buy citizenship” in a target country. The Telegraph reported this month that a Bulgarian passport can be purchased underground for £150,000, which enables the buyer to pose as a European Union citizen, even if he or she has a criminal record, and become eligible for government services and public benefits.
PBS’s Frontline has reported that Al Qaeda uses counterfeit passports and has conducted passport forgery workshops “to travel internationally in order to raise funds, recruit operatives, train the operatives in Afghanistan and send them out to plan and conduct terrorist attacks.”
False identities also complicate law enforcement’s efforts to investigate crime. The CBC recently highlighted the threat of “synthetic ID fraud,” saying that “Fraudsters have been able to obtain driver’s licences, passports, phone numbers and credit cards, as well as open bank accounts, take out bank loans and create companies, all under fake names. By the time police move in, many of the fraudsters have vanished, leaving investigators trying to locate people who never existed.”Diplomatic passports
Possession of diplomatic passports by ambassadors, consuls, and other diplomatic officials immunize travelers but from bag searches at airports. This “diplomatic pouch” carve-out presents a significant smuggling risk.
Financial crimes analyst Kenneth Rijock revealed that Hezbollah agents based in South America were granted diplomatic passports by Venezuela, meaning:
Hezbollah agents could transport cocaine in international commerce, without fear of arrest. They also can carry bulk cash, or financial instruments into offshore financial centres, this moving Hezbollah drug profits along on their journey to controlled entities inside Lebanon. One wonders whether how many Hezbollah agents are running around Europe with Lebanese diplomatic passports, moving cash or cashier's cheques through EU banks, in support of the organisation's terrorist goals…
The Venezuela connection was followed by an uproar in Canada over an Iranian national who entered the country with a diplomatic passport issued by St. Kitts & Nevis after the Iranian paid a $1 million bribe to Caribbean officials.
Author of the book Dirty Dealing Peter Lilley once observed that possession of a diplomatic passport from “an obscure country” could be red flag for money laundering.What can be done
There can always be tighter controls and better physical standards for passports to prevent counterfeiting, the same way that officials do with currency. More countries could use Interpol’s database of lost and stolen passports, although there are costs associated with that. The Heritage Foundation has argued that the biographical questionnaire in the U.S. passport application should be modified. Individuals should also take steps to safeguard their own passports from being stolen or copied.
Another measure to consider would be for some countries to increase the penalties for counterfeit passports. Hollywood actor Wesley Snipes got off with simply being able to return to his country without even paying a fine after allegedly being caught abroad with a fake South African passport.
Meanwhile, Human Appeal International and Muslim Aid Australia , two organistaions known to have financed jihadi activities , continue to operate unhindered.
ASIO spying on Syria fund-raisers amid terrorism funding fears
- January 12, 2014
- Natalie O'Brien
Australia's intelligence agencies have been monitoring phone calls, freezing bank accounts and making covert home visits to warn people donating money to Syrian war victims that they suspect the funds might instead be financing terrorism.
Fairfax Media has been told that charities, community organisations and individuals have been visited by agents of the domestic spy agency ASIO, warning them not to continue sending money overseas through the channels they have been using.
Some people have received letters, without any prior warning, saying accounts had been frozen.
Community members have complained about the tactics, saying it is creating an atmosphere of fear and anxiety for people who are already ''emotional'' about the plight of the Syrian people.
An Erskineville woman, Khadija, whose brother had his passport suddenly cancelled on the grounds he might ''engage in politically motivated violence'', claimed that her phone messages had been monitored by ASIO and people who had donated to her fund-raising drive had been intimidated by visits from agents warning them off.
She said ASIO told people that they had Viber messages between her and them about the donations. ''They were terrified,'' she said. ''And they won't speak to me any more.''
Yet Khadija said ASIO had not approached her or asked any questions about the fund-raising that she had been doing. She believes the Muslim community is being targeted just for trying to help people who are victims of the Syrian conflict.
''All we wanted to do was send money for the kids, and that is what we have been doing,'' she said.
Sydney's Middle Eastern communities have been working hard raising money for the victims, says community advocate Rebecca Kay.
She told Fairfax Media that people were devastated about what was taking place.
''They are very emotional - at fund-raising events they are taking the rings off their fingers and the necklaces from their necks to auction to raise money,'' Ms Kay said.
But the problems have stemmed from intelligence reports the flow of some money overseas has ended up supporting banned groups involved in the conflict and not the victims. Financing terrorism is an offence under Australian law.
The Independent National Security Legislation Monitor annual report said the conflict was of concern in relation to terrorism financing. It said $21 million had been sent from Australia in the past financial year.
A spokesman for ASIO said it could not comment on operational activity. But a spokesman for the Australian Federal Police, which investigates terrorism financing offences, said the AFP understood many Australians wanted to help and might want to send money through trusted family members or friends.
But he said the best way was through legitimate UN agencies and non-government organisations that did not support either side in the conflict. That way, he said, they were not committing any offences.
One community member criticised the ''back-door approach'' by authorities, saying it was not helping. She said the community was always active in fund-raising, as it was last year for bushfire victims.
''It is so simple,'' she said. ''Educate the community, put some advertisements out there in the Arabic media and the local newspaper saying which charities to donate through and why.
''Visiting people at home and fearmongering isn't right. It's cruel. People just want to help and they already have trust issues.''
But Dr Tamer Kahil, president of the Australians for Syria Association, which has been sending money through legitimate channels, said he did not see harm in government officials coming to ask questions.
''We welcome them and open our books for them,'' he said. ''I don't want anyone to be scared.''
Children caught in Syria crackdown
- PAUL MALEY
- THE AUSTRALIAN
- APRIL 03, 2014 12:00AM
TEENAGE Australians, including at least one high school student, are having their passports withheld by ASIO amid fears they will use them to travel to Syria and fight with banned jihadist groups.
In a measure of how deeply the Syrian civil war is being felt in migrant communities across Australia, Muslims as young as 18 are understood to have been caught up in an ASIO sweep aimed at stemming the flow of Australian fighters. At a time when most kids are focusing on homework and the looming burdens of the HSC, Hamzi, 18, has told The Australian of how he ordered ASIO officers to leave the family home and sought to convince his tearful mother he had no plans to fight in Syria.
Hamzi’s travails began after he applied for a passport, his first. Having recently turned 18, he said he wanted to perform the haj, the pilgrimage to Mecca required of all observant Muslims.
In January, he received a letter from the Department of Foreign Affairs and Trade advising him his passport application remained “on hold’’.
“A competent authority as defined in the Australian Passport Act 2005 has advised the Australian Passport Office that it is currently assessing whether it will request the Minister for Foreign Affairs to refuse to issue you with a passport,’’ the letter read.
The “competent authority’’ is almost certainly ASIO, which in the past nine months has cancelled at least 33 passports to stem the tide of Australian Muslims travelling to Syria.
Not long after that, Hamzi’s mother received a phone call from ASIO officers requesting a meeting. While Hamzi was at school two female ASIO officers came to his house.
“They told my family, ‘don’t let Hamzi know’,’’ the young man told The Australian.
The officers showed Hamzi’s mother some photographs. Three faces belonged to known extremists, one of whom is facing charges over a facilitation network that police allege sent at least five Australians to the Syrian frontline.
Hamzi said two of the men he had never met and the third he had encountered only briefly.
“They tell her, ‘he’s going to Syria to fight’,’’ he said. “They said, these people are influencing him to go … They said he’s influencing them to go, we’re trying to save your kid from doing bad.’’
Hamzi said his mother was shocked. “After that she started crying,’’ he said. The meeting was supposed to be secret, but a family member texted Hamzi while he was at school. He rushed home.
“When I got in I started screaming,” he said. “I was screaming at my mum, ‘Why you letting them in? They got no warrant or anything’.’’
The meeting ended abruptly but not long after that Hamzi got a call from an ASIO officer requesting a meeting, which he refused to attend. “I know that if I was to go there they would have put bullshit on me, they always spin stories,’’ he said.
Hamzi suspects ASIO may also have been in contact with his school. “One hour before they called me, my deputy came up to me and said, ‘I thought you were going to Syria’, and started laughing,’’ he said. “A couple of days later I came back to school, this teacher she goes, ‘Hamzi, come here’. She goes, ‘the way you’re going, you’re drifting away from people, you’re going to Syria, you’re going to fight, don’t do this, this is all extremists’. I just laughed.’’
ASIO said it did not comment on specific cases. An ASIO spokesman made it clear the agency’s actions were often motivated by a desire to protect vulnerable individuals, as well as the broader community.
“(Withholding passports) can safeguard individuals — including, in some cases, victims of radicalisers who are actively grooming young Australians for participation in extremist violence overseas,’’ the spokesman said.
He said there was “deep concern’’ in the community about this influence. “A passport cancellation can prevent an Australian causing harm or being harmed in the misguided pursuit of someone else’s extreme views,’’ the spokesman said. ‘’It can also help the government and community steer young Australians away from extremist violence, potentially helping young Australians to avoid possible jail terms and criminal records, either in Australian or overseas.’’
When dealing with undesirable behavior by foreign governments, the U.S. has increasingly employed narrowly targeted sanctions against individual officials of those governments, from human rights abusers in Syria to Russian leaders responsible for the annexation of Crimea.
But the same logic has yet to be applied to the ISI, Pakistan’s terrorist-sponsoring intelligence agency, which, compared to Russia and Syria, has posed a more direct threat to U.S. forces and civilians through the ISI’s sponsorship of terrorism against our troops in Afghanistan and through the safe haven it provided to Osama Bin Laden.
New York Times reporter Carlotta Gall revealed last week that, “Soon after the Navy SEAL raid on Bin Laden’s house, a Pakistani official told me that the United States had direct evidence that the ISI chief, Lt. Gen. Ahmed Shuja Pasha, knew of Bin Laden’s presence in Abbottabad,” and that the ISI ran a special desk to “handle” Bin Laden.
The Bin Laden revelation is only the tip of the iceberg. The Taliban itself was created by Pakistan, which allowed Al Qaeda to use Afghanistan as a base for hatching the 9/11 plot. The perpetrators of the 26/11 terrorist attacks against Mumbai that left over 160 dead were also “clients and creations of the ISI.”
In an intercepted conversation, former ISI chief Gen. Ashfaq Kayani was heard describing Jalaluddin Haqqani, leader of the terrorist Haqqani network, as a “strategic asset.” That is the way that Pakistani intelligence has looked at jihadists for decades—that holy warriors provide strategic depth and variety to the conventional armed forces along Pakistan’s borders. They regard terrorism as a tool in a broader arsenal against Pakistan’s foes, making the country a state sponsor of terrorism in the truest sense of the phrase.
Designating a foreign spy service as a terrorist entity wouldn’t be such a major leap as it appears at first blush. Interrogators at Guantanamo Bay are already trained to treat detainees affiliated with ISI the same way they would treat detainees affiliated with Al Qaeda or the Taliban. The approach is partly due to evidence of ISI’s role in coordinating terrorist groups in operations targeting Afghanistan and India.
There is already some support for such sanctions. Bruce Riedel, former CIA official and senior fellow at the Brookings Institute, called for individual sanctions against ISI officials. New York writer Suketu Mehta said “America and other countries should declare Pakistan's Inter-Services Intelligence, some of whose officials have a long history of backing terrorists attacking India, ‘a terrorist entity’.” The Afghan National Security Council also expressed strong support last year for designating the ISI as a terrorist organization (see here and here).
Are there arguments against levying sanctions against the ISI? Yes. Pakistan could retaliate by ceasing its assistance to us while our troops are still fighting in Afghanistan. But if it weren’t for Pakistan playing midwife to the Taliban, and the Taliban subsequently partnering with Al Qaeda, the terrorist attacks of 9/11 wouldn’t have happened in the first place. It makes little sense to mollycoddle the puppet master because we think it will help us attack the puppet.
Unfortunately, sanctions often don’t achieve the desired results. Foreign aid is fungible, and if the U.S. and U.K. continue bestowing lavish foreign aid upon Pakistan, the government there will simply be able to move money from development and education projects toward military and intelligence operations.
But to the extent that we use sanctions at all as an instrument of foreign policy, it should be done for the right reasons. Lately we use sanctions like a necktie that we wear to look fashionable, while absentmindedly dangling the tie over a paper shredder. Rather than a entangling ourselves in the regional or internal affairs of bad actors in places where we have few interests, sanctions should be used as a tool used to serve our own national security interests, and to contain those whose actions do us harm.
The family of Boston marathon bombers Tamerlan and Dzhokhar Tsarnaev received over $100,000 in public benefits from 2002 to 2012 according to documents compiled a year ago from state agencies by the Massachusetts House Committee on Post Audit and Oversight.
The aid included food stamps and welfare benefits to the Tsarnaevs’ parents and to Katherine Russell, Tamerlan’s wife. Dzhokhar Tsarnaev also received student financial aid and forbearance (although he probably omitted income from drug sales and auto repair referral kickbacks on his student aid application).
Public benefits, being somewhat fungible, free up money for the recipient to put toward purposes separate from what was intended. During the period of time that Katherine Russell received food stamps and welfare payments (2011 through 2012), Tamerlan was able to fly to Russia in early 2012 to seek out radical connections. In effect, the benefits that Tamerlan and Katherine received through her name may have enabled the purchase of Tamerlan’s plane ticket to the jihadi rat’s nest of the North Caucasus.
The question of public benefits funding terrorists in Boston comes after years of ongoing scandals documented in Great Britain, where dangerous Islamists like Abu Yahya, Anjem Choudary, Emdadur Choudhury, and Abu Qatada have had their homes, welfare benefits, and legal expenses paid from taxpayer money. “Twentieth” 9/11 hijacker Zacarias Moussaoui also received welfare benefits in England, along with the family of Abu Hamza. Canada, Germany, the Netherlands, and Scandinavia have also dealt with the same exploitation of their generous public benefit programs by Islamists.
Several of these abuses probably occurred because of guidance that individual benefit recipients received from radical imams in their communities. Deceased terrorist imam Anwar al-Awlaki once wrote in Inspire magazine that, “All of our [Islamic] scholars agree on the permissibility of taking away the wealth of the disbelievers in dār al-ĥarb [the non-Muslim world] whether by means of force or by means of theft or deception,” for the purposes of carrying out jihad. And the same Anjem Choudary mentioned above once encouraged Muslims living in the U.K. to collect public benefits as “jihad seeker’s allowance” instead of getting a job.
In light of this problem, it may be time to contemplate whether government agencies that issue public benefits should be required to adhere to the same know-your-customer provisions and due diligence requirements under which private sector financial institutions already operate.
Banks are required to conduct due diligence on account holders by carrying out activities like cross-checking their names against databases of sanctioned individuals or politically-exposed persons to help ensure that the bank is not assisting the customer in carrying out financial crimes such as money laundering, sanctions evasion, terrorist financing, graft, or other offenses. Bank employees also have mechanisms and the responsibility to file reports when suspicious activity is observed.
However, there appears to be no equivalent legal requirement for government agencies that provide public benefits such as welfare payments, food stamps, or tuition assistance to undertake these due diligence and reporting functions. Agencies screen applicant eligibility for a variety of public benefits (such as proof of financial need for student aid, and proof that you are actively seeking employment to obtain jobless benefits, etc.), but this screening tends to focus on the applicant’s legal eligibility for the benefit rather than on the risk that the benefit may be diverted by the recipient toward criminal or terrorist enterprises.
Neither is there a uniform standard for government agencies to report criminal misuse of public benefits to a central authority. Rather, suspicions of fraudulent claims are handled differently by every agency awarding benefits, with different mechanisms for investigating and denying claims. And again, the benefit fraud cases are focused on false claims by recipients who never should have received the benefit, and rarely target individuals who receive a benefit lawfully but misappropriate that benefit toward unauthorized purposes.
Should an assessment of high risk or an OFAC database name match be grounds for the denial of the benefit? Perhaps not, but at least the filing of a suspicious activity report by a government compliance officer would provide additional data points for regulators to review and share with law enforcement as needed.
If due diligence requirements are worthwhile enough for the federal government to impose on the private sector, the private sector financial institutions have a right to ask the government to eat its own cooking. This expansion of know-your-customer provisions to the government sector would seem especially important considering statements by radical imams and actions by terrorists like the Tsarnaev brothers to use public benefits to finance their planning and terrorist operations.
Last week, Bell State Bank in North Dakota announced that it would stop doing business with companies that remit money to Somalia. The move follows decisions by Minnesota banks in 2011 to stop providing Somali remittance services, and an attempt by Barclays last year to cut off its partnership with Dahabshiil, a money transfer company with primary operations in Somalia. The banks have been challenged in courts on both sides of the Atlantic, and advocacy groups have heavily criticized the banks’ decisions on humanitarian grounds.
Indeed, humanitarian considerations are of the utmost importance. Unfortunately, money transferred to Somalia, particularly through Dahabshiil, all too often falls into the wrong hands and perpetuates the cycle of violence in Somalia. Banks should stand fast in their original decisions, and here are five reasons why:
1. The risks are real. The frequency of cases involving Somalis in the West transferring funds to al-Shabaab over the last few years presents genuine concerns to financial institutions. For instance, four men in California were found guilty last year of transferring money to al-Shabaab through Shidaal Express, a Somali hawala business. Two Somali women in Minnesota were sentenced in 2013 for sending money to al-Shabaab through several remittance channels including local hawala dealers and Dahabshiil. A Saudi-American was also indicted last year for wiring money to al-Shabaab. In 2012, a man in London admitting transferring £8,900 to fighters in Somalia. Danish intelligence revealed in 2012 that the equivalent of thousands of dollars a day is sent to terrorist organizations outside of Denmark—mostly to Somalia, and often unwittingly.
Apart from the risks on the ground in Somalia, Western banks have real reasons for concern that if they continue relationships with Dahabshiil, they could subsequently be fined by regulators at a future date if political winds change. U.S. banks are surely aware, for example, that decisions on whether to fine, settle with, or prosecute banks with lax compliance programs have a great deal to do with the shifting political and prosecutorial priorities of whoever happens to be in charge at the Department of Justice and the financial regulatory agencies. One official may take a very friendly view toward facilitating Somali remittances this year, but a different person will be calling the shots two years from now.
2. The risks are not decreasing. Gone are the days of 2012 when al-Shabaab appeared to be on the ropes in 2012 both financially and militarily. Al-Shabaab was able to turn around its financial situation after the fall of Kismayo by cutting deals with occupying forces. Al-Shabaab continues to profit from imposing taxes on commodities such as charcoal and sugar, and their role as ivory trade middlemen between poachers and buyers appears to be growing. Al-Shabaab is still capable of carrying out devastating strikes such as the Westgate Mall attack and the recent assault against Somalia’s presidential palace that left 11 dead.
3. Dahabshiil poses a unique risk. Western readers should be aware of independent reports by the Somali diaspora news media that Dahabshiil finances terrorism. According to reports by Waagacusub, Kalshaale, and Suna Times, Dahabshiil pays one-half million dollars twice a year to al-Shabaab. The payments allegedly resumed last year after a brief dispute during which Dahabshiil had ceased making payments. One Guantanamo Bay detainee previously worked for Dahabshiil, and the presiding officer at a hearing for that detainee determined that his Dahabshiil branch transferred money for terrorism. However, coverage of these allegations has been limited partly due from legal threats against journalists and online reputation management by Dahabshiil.
4. There are alternatives to Dahabshiil. Suna Times reports that Somalis in Britain can use Zaad Service or Kaah Express, which were unaffected by Barclays’s plans. These money transfer services must be carefully examined, of course, but it would be quite misleading to say that the only wire service that Western banks can partner with to send money to Somalia is Dahabshiil.
5. Well-intentioned remittances to Somalia carry significant risk. Cleanly transferred funds through well-vetted companies to legitimate recipients are at significant risk of being subsequently "taxed" by al-Shabaab. When charcoal or sugar is brought to market, for instance, these commodities are taxed by al-Shabaab at 2½ percent according to reports from the UN Monitoring Group on Somalia and Eritrea. Al-Shabaab uses these tax revenues to purchase more weapons, pay fighters' salaries, and extend their control in Somalia, thus perpetuating the cycle of violence. Even money that is not directly channeled toward terrorist purposes is nevertheless at risk of being intercepted by corrupt government officials. Somalia still rates dead last in Transparency International’s annual corruption index. A recently leaked UN report tells of “‘high level and systematic abuses’ by Somali government officials who have passed weapons and ammunition to Al Shabaab.”
In light of these risks, Western banks and businesses have an affirmative obligation to tread with extraordinary caution before entering any relationships with Somali financial entities in general, and Dahabshiil in particular.
Five detainees at Guantanamo Bay have drawn up a lengthy business plan for an agricultural venture in Yemen as part as an instructional exercise. The document was approved for release last month by military officials. Judicial Watch rightly observes that the level of detail in the plan shows that the detainees “had access to many research tools, likely on the internet.” Although the business proposal appears to be only a classroom activity and not an actual, shovel-ready project, the language in the document indicates that terrorists would be comfortable with crowdfunding as a sharia-compliant platform to raise money.
In their business proposal, the self-described “Board of Directors of Yemen Milk & Honey Farms Ltd” specifically mentions Kickstarter, RocketHub, and other crowdfunding platforms as options for financing their project. They also note that crowdfunding can be equity-based, lending-based, reward-based, or donation-based. After reviewing their alternatives, the board concludes that they would like their financing be “equity based or reward based, as the board has observed [that the] interest-based economy is facing serious problems world wide, specifically in Europe and America.”
Using the recession has been a convenient target for Islamist criticism of the Western financial system since 2009, ignoring the fact that the West still leads the world across any recognized standard of economic development and standard of living, and ignoring the larger context of long-term economic success of the West compared to the economic failures of the interest-shunning Arab world over several centuries. But regardless of current or historical economic conditions, the truth is that the “board members” would still oppose interest on religious grounds. Riba, the word used in Islamic texts for interest, is the same Arabic word that applies to unnatural growth and swelling akin to pond scum and asthma.
Islamic law allows for profit and investments involving co-ownership and profit sharing. One such sharia financial concept that shares similar traits with crowdfunding is mudarabah, which Islamic finance lawyer John Dewar defines as, “An investment fund arrangement under which the financiers act as the capital providers (rab al-mal) and the client acts as the mudareb (akin to an investment agent) to invest the capital provided by the rab al-mal and manage the partnership.” For a sharia crowdfunding project, the donors would serve as the rab al-mal.
Analysts for McKinsey & Co. further note that “Islamic commercial law strongly favors equity over debt financing, which suggests that crowdfund investing platforms are especially well suited to Muslim-majority countries. In our view, crowdfund investing and Islamic financial services are inherently compatible and mutually reinforcing.”
Thus, the business school at Camp 6 of Guantanamo prison is well-aligned with contemporary sharia financial strictures. The “students” also appear to be one step ahead of regulators, who are just now developing anti-money laundering rules for crowdfunded projects which are be vulnerable to financial crime and exploitation. As AML attorney Christine Duhaime summed up crowdfunding risks last fall, “The combined effect of crowdfunded securities being low-priced, placed in offerings that are exempt from [SEC] registration and not subject to the filing review process of a registered offering, makes crowdfunding open to being used as a vehicle for money laundering and other financial crimes.”
In addition to crowdfunding regulations currently under review, stronger terms of service by the crowdfunding companies may be in order to prevent exploitation of their websites by users who promote violence, illicit activities, or otherwise serve the interests of criminals and terrorists.
Worrisome projects include a Kickstarter project in 2012 that billed itself as “your chance to become part of the Arab Spring.” If the two men who proposed the project had received the $20,000 they sought, they pledged to “travel together to Syria and join the rebels on the front line against the dictator Bashar al-Assad.” Late last year, Forbes reported that an anarchist launched a crowdfunded bitcoin-based “assassination market.” Also last year, a would-be Canadian bounty hunter attempted to crowdfund the creation of a private militia squad to hunt down Ugandan guerrilla Joseph Kony. A convicted drug trafficker raised 20,000 AUD through a crowdfunding website from his jail cell last year. In 2012, the micro-crowdfunding site Gittip was exploited by an enterprising user to launder money stolen from credit cards. There have also been ongoing attempts to crowdfund the legal defense of blackmarket SilkRoad operator Ross Ulbricht.
The crowdfunding websites need to determine whether they really want to facilitate such endeavors. After all, nobody really wants to see how Khalid Sheikh Muhammad’s Kickstarter project would turn out.
Acknowledgment: Special thanks to Twitter user @RushetteNY for sending in the news about the Guantanamo Bay “business school” project.
by Ganesh Sahathevan
The tweets below by Turkish Foreign Minister Ahmet Davutoglu, read in the context of this 2007 post http://www.terrorfinance.org/the_terror_finance_blog/2007/02/yassin_alkadia_.htm, suggests that Turkey,and the Muslim Brotherhood,are likely to intervene in the Russia-Ukraine conflict in order to better incorporate Crimea into their sphere of influence.
Malaysia’s Anwar has well established links to the Muslim Brotherhood ,as are his links to Erdogan and Davutoglu. On 7 August 2012 Anwar tweeted that Erdogan’s wife Amina had spoken to his wife Wan Azizah Ismail about Myanmar's Rohingya Muslim minority prior to her and Erdogan’s visit to Myanmar. Wan Azizah was meant to be on that trip,but pulled out due to visa issues.That Anwar ,Erdogan and Davutoglu would cooperate on a matter that has little to do with Turkey except that it involves Muslims suggest that the Brotherhood is able and willing to intervene in any part of the world where Muslims are affected.
Turkey's links to Crimea are certainly greater than those to the Rohingya of Myanmar and hence one should expect that it will intervene in the Russia-Ukraine conflcit but on the side of Crimea ,as the following tweets seem to indicate:
- Ahmet Davutoğlu @A_Davutoglu_eng Mar 1
- Turkey will make every effort to secure Crimea’s future within Ukraine’s territorial integrity
- Ahmet Davutoğlu @A_Davutoglu_eng Mar 1
- I also assessed the common steps that could be taken with US and German Foreign Ministers and EU High Representative Ashton
- Ahmet Davutoğlu @A_Davutoglu_eng Mar 1
- As of tomorrow I will start meeting with Ukrainian officials to assess the difficult period they are going through.
- Ahmet Davutoğlu @A_Davutoglu_eng Mar 1
- I met with Mustafa Cemil Kırımoğlu, the symbol of Crimean solidarity, as soon as I arrived in Kiev. pic.twitter.com/muBOFAJybr
- Ahmet Davutoğlu @A_Davutoglu_eng Feb 28
- I will go to Kiev to discuss the latest situation in Ukraine, bearing in mind the responsibility ascribed by our common fate.
More Ahmet Davutoğlu @A_Davutoglu_eng Feb 28
Just as the fate of our Rumelian kins is sacred to us, the fate of our Crimean brethren is sacred as wellExpand
by Ganesh Sahathevan
While I have previously taken a top-down approach to describing the networks that support jihadists (see goo.gl/vBAolR) , the profileartion of Al-Qaeda franchises and off-shoots, such as those at work in Syriai requires that a bottom-up , or grassroots, approach be adopted.
While the top down approach looked at the support states provided jihadists, the bottom-up approach is concerned with how individuals at the grassroots can comprise networks that jihadists might rely on for their activities. Civil rights activists might be alarmed by such language, afraid that large sections of a given population could be branded jihadists, but there is in fact a theoratical framework and empirical evidence to support this hypothesis.
Juan José Miralles Canals ii describes these types of networks using a mathematical and computer modeling approach:
Passive supporters of the jihadist cause are normal people who do not need to express their position explicitly. They just do not oppose a jihadist act in case they could. They are sharing independently an identical opinion of identifying with the jihadist cause. They do not need to communicate between then. This is an individual dormant attitude associated to a personal opinion. It does not need to be explicitly so. They are unnoticeable, and most of them reject the violent aspect of the jihadist action.
Social permeability to the jihad describes the physical pathways that nodes of the jihadist networks can establish and use to move freely and safely along, thanks to the passive supporters of the jihadist cause.
Social permeability to the jihad describes the physical pathways that nodes of the jihadist networks can establish and use to move freely and safely along, thanks to the passive supporters of the jihadist cause.
Cannals provides a mathematical analysis which concludes that disruption at the nodes is required to disrupt jihadists activities. Given what was seen in Iraq, and now Syria ,and well before these, Gaza, of apparently innocent non-combatants supporting the jihadists' cause, it does appear that Cannals theoretical perspective has and is being borne out in the real world.
I have previously written about the relevance to this day of the British Malaya administration's policy of new villagesiii, used to defeat the Communist Party Of Malaya, which while being financed by the Peoples' Republic Of China, relied heavily on the support of local Chinese to facilitate their activities on the ground.
That solution may today seem inhumane, but critics conveniently forget that lives were saved by that solution. Be that as it may, Russian President Vladimir Putin might have provided an alternative , a middle path:
Russian President Vladimir Putin has signed into law the controversial bill ….amending the Criminal Code to expand the number of offenses classified as terrorism and require the relatives of people deemed to have committed acts of terrorism to pay financial compensation for the material damage they causediv.
Not unexpectedly Putin's law has already come under criticism. However it is suggested that critics should rather see this law as the basis for other similair policy instruments that might be used to curb acts of terrorism. Either that, or a return to the new villages.
ii Fourth-generation warfare: Jihadist networks and percolation
iii http://www.terrorfinance.org/the_terror_finance_blog/2007/04/ending_support_.htmliv Russia To Hold Relatives Of 'Terrorists' Financially Responsible For Material Damage
By Animesh Roul
The fake currency trade has been haunting Indian security establishments as well as economic intelligence agencies for quite a long time. Most recently in February 2014, the finance minster of India informed the Upper House of Parliament (Rajya Sabha) that counterfeit Indian currency notes worth INR 107.33 crores (approximately US $ 17 million) have been seized between January 2010 and June 2013. If the intelligence agencies are to be believed, the FICNs are printed in Pakistan and brought to India through couriers via Bangkok, Kathmandu and Dhaka airports. There are also reports that the FICN cartels are pushing counterfeits through China, Malaysia, the United Arab Emirates (UAE), Denmark, Netherlands, Singapore and Sri Lanka.
To deal with this growing menace, the government has constituted a special FICN coordination (FCORD) group within the Union Ministry of Home Affairs to share intelligence and information amongst different central and state government agencies. The Central government has asked Research & Analysis Wing (R&AW) to conduct a security audit of the international firms supplying ink and paper for printing currency. Sources indicated that ‘groups based in Pakistan have managed to source similar paper and security ink from some foreign countries.”
Is this part of Pakistan’s design against India (‘economic jihad’) waged along with its proxy wars and organized crime syndicates? The answer is in the affirmative. The observation received a major boost when the 2011 International Narcotics Control Strategy Report of the US Department of State underscored the scourge of FICN. The Report observed that, “India (also) faces an increasing inflow of high-quality counterfeit currency, which is produced primarily in Pakistan but smuggled to India through multiple international routes. Criminal networks exchange counterfeit currency for genuine notes, which not only facilitates money laundering, but also represents a threat to the Indian economy.” 
Indian intelligence agencies have already found that that most of the FICNs in circulation in India are reportedly printed in government-controlled printing presses at Karachi, Multan, Quetta, Lahore and Peshawar in Pakistan, and the Inter-Services Intelligence (ISI) has a major role in it.
Counterfeit Funds Terror
The terror-linked crime syndicate of Dawood Ibrahim is involved in FICN activities since long. Two of his gang members, identified as Aftab Bhakti and Babu Gaithan, are managing the entire operation from Dubai. According to reports, they find Indian labourers in Dubai and buy them a return ticket to India and give them a suitcase containing fake currency along with other pleasantries.
Investigations into past terror conspiracies and confessions by arrested terror operatives have more or less reinforced the fact that actors (both State and non-state) in Pakistan are solely responsible for printing and smuggling fake Indian currencies through various channels to fuel terrorism and criminal activities inside India. Large portions of funding for Kashmir- centric Hizbul Mujahideen comes from fake currency cartels based in Pakistan. The March 2011 arrest of HM operatives in Delhi proved the point that the Kashmir-based militant group has been running an FICN operation with Pakistan’s connivance. Terror events like the attack on the Indian Institute of Science in Bangalore (Karnataka) in December 2005 and the November 26-28, 2008 Mumbai terror attacks have a counterfeit trading and hawala (informal and illegal money transfer system) link. Last but not the least, arrested Lashkar-e Taiba operative Abdul Karim Tunda revealed how Pakistan's intelligence agency ISI used to run the entire supply chain of FICNs. Tunda also spilled the name of Iqbal Kana, who according to him, is the kingpin of FICN dealings in Pakistan. Tunda has been moving counterfeit notes to fund terrorism India through his contacts inside the country. The Indian Mujahideen which has Pakistan’s patronage also raises funds through hawala transactions and circulation of fake currency. While doing this, terror groups move genuine and fake currencies together to evade suspicion. The case of IM operative and sympathizer Maulana Hussain Shabbir Gangavali, a suspect in the July 2008 Bangalore blasts case, was found guilty in a case for the possessing 250 counterfeit currency notes. 
IM’s India operations chief Yasin Bhatkal was also arrested once by the Kolkata Police's Special Task Force (STF) in 2009 for carrying fake Indian currency notes, but managed to get bail in that case. 
Acts of Terrorism
FICN trading has been a major source of funding for terrorism in India. However, there was some legal loophole due to which it could not be labeled as an act of terror under Indian law. The Mumbai High Court in late October 2012 stated that the mere possession and circulation of fake currency cannot be termed an act of terror under the provisions of the Unlawful Activities (Prevention) Act. The Court observed that “circulation of counterfeit currency, even if it is printed in a foreign country can’t be considered, by definition, as a terrorist act”, while granting bail to one Dhiren Ghosh, arrested by the Maharashtra Anti-Terrorism Squad in 2009 for alleged possession of counterfeit notes. However, a couple of months later, Indian Parliament passed a bill on the issue making the circulation of counterfeit currency (not mere possession) either by an individual, group of individuals or an association, as a terrorist act. Arguably, the bill was in tandem with the suggestions of the Financial Action Task Force (FATF) of which India became a member in 2010. Following this development, in January 2014, a special National Investigating Agency (NIA) court gave life term to six convicts in a 2009 FICN case including Dhiren Ghosh, Nooruddin Bari, Mohammed Samad and Aizul Shaikh and convicted them under Section 16 and 18 of the Unlawful Activities (Prevention) Act (UAPA) and Section 489 of Indian Penal Code (IPC) on January 29, 2014. 
India’s FICN problem has received increased international attention with the US Department of State and Interpol exchanging classified information on the developments. The Unlawful Activities (Prevention) Amendment Act, 2012 as passed by Parliament has come into force from February 01 2013 which undoubtedly broadens the scope of the ‘terrorist act’ by incorporating threats to the economic security and the monetary stability of India by way of production, smuggling or circulating of high quality counterfeit fake currency. The law increases the period of declaration of an association as unlawful from two years to five years, criminalizes high quality counterfeiting and includes within its scope offences by companies, societies or trusts and provides punishment.
While the Reserve Bank of India (RBI) takes a decision to withdraw currency notes issued before 2005 to curb counterfeiting and attempts to improve the security features, now the onus is on the security agencies to track down Islamic terror groups, left-wing extremists and other separatist entities which have devised new methods to receive and raise funds for their anti-India operations.
 .CNN IBN, October 17, 2011, http://ibnlive.in.com/news/dawood-behind-fake-currency-operation-in-india/193917-3-159.html
 The Hindu, August 21, 2013, http://www.thehindu.com/news/cities/Delhi/tunda-pumped-counterfeit-currency-from-across-the-border/article5044302.ece
 Mid-day, November 23, 2011, http://www.mid-day.com/articles/gangavali-gets-5-year-ri-in-fake-currency-case/143457
 India Today, August 29, 2013, http://indiatoday.intoday.in/story/indian-mujahideen-co-founder-yasin-bhatkal-bong-connection/1/304443.html
 Press Trust of India/First Post, January 30, 2014, http://www.firstpost.com/india/six-accused-in-fake-currency-case-get-life-term-under-terrorist-act-1366831.html?utm_source=ref_article
Victor Comras has pursued a public service career in law and diplomacy, and is an internationally recognized expert and frequent speaker on the rule of law, international sanctions, anti-money laundering measures and the global effort to combat terrorism and terrorism financing. His articles have appeared in numerous national and international press media, books and professional journals. He is the author of Flawed Diplomacy: The United Nations and the War on Terrorism (Potomac Books, 2010), a co-author of Pressure: Coercive Economic Statecraft and U.S. National Security (CNAS 2011), and a contributing authorof Terrorism Financing and State Responses (Stanford Univ. Press 2007) and to the soon-to-be released Understanding and Combating Terrorist Financing (CRC Press 2014) .
He has been actively engaged since the mid 1970’s, both inside and outside the U.S. government, in advising government agencies, international organizations, foreign governments, and private clients concerning matters related to sanctions, combating terrorism, terrorism financing, money laundering, foreign corrupt practices, arms trafficking, WMD proliferation, and other illicit trans-national activities. He has also taught university level courses on these topics.
Prior to entering private law practice Mr. Comras held several senior positions at the U.S. State Department dealing with strategic trade regulation and bilateral and international economic and financial issues. He was the chief U.S. architect of the international economic sanctions against Yugoslavia during the Bosnia and Kosovo wars, and was appointed by President Clinton in 1994 to serve as the first U.S. envoy to the Former Yugoslav Republic of Macedonia. His other diplomatic assignments as a Senior Foreign Service Officer included postings in Africa, Europe and Canada, and at the United Nations, the Council of Europe, the European Union and COCOM. He also served as the first State Department Coordinator for the Restitution of World War II (Holocaust) assets. He is recipient of 10 Superior and Meritorious Honor Awards from the Department of State and the President's Medal from the Council of Europe.
Following the 9/11 attack on the United States Mr. Comras was asked by UN Secretary General Kofi Annan to serve as one of five international monitors charged with overseeing the implementation of Security Council sanctions measures against al Qaeda and the Taliban. And, in 2009 he was appointed to serve as the US member of the UN Security Council's special Panel of Experts on UN sanctions imposed on North Korea.
Mr. Comras is a partner of, and serves of counsel to, the Comras and Comras Law Firm in Fort Lauderdale. He also serves as special counsel to the Eren Law Firm in Washington DC. Mr. Comras received his LLM from Harvard University in 1975 and his J.D. (with honors) from the University of Florida Law Center in 1966, where he was on the Law Review. He earned his B.S. from Georgetown University in 1964. He is admitted to the bar in Florida and before U.S. Federal Courts.
Animesh Roul is the Executive Director at Society for the Study of Peace and Conflict, (www.sspconline.org) a New Delhi-based policy research think-tank. In his earlier stint he worked as a Research Associate at New Delhi-based Institute for Conflict Management, which hosts a leading terrorism database on South Asia (www.SATP.org). He specializes in counterterrorism, radical Islam, terror financing, armed conflict and issues relating to arms control and proliferation in South Asia.
He has written extensively on these subject areas in journals, policy magazines, and the press, including Terrorism Monitor, the CTC Sentinel, Jane’s Intelligence Review, Militant Leadership Monitor, ISN Security Watch, and CBW Magazine, among others. Recently he coauthored a book on the India’s indigenous terror group (‘Indian Mujahideen: Computational Analysis and Public Policy, Springer, New York, 2013). His views appeared in the Rediff.com, Economics Times, the Hindu, International Business Times, among others. He also edits ‘South Asia Conflict Monitor’ (SACM), a monthly online bulletin on armed conflicts and terrorist violence in South Asia.
Mr. Roul holds a master's degree in Modern Indian History and received a Master of Philosophy (M.Phil.) degree from the School of International Studies, Jawaharlal Nehru University, New Delhi.
At the Terrorism Finance Blog, he will be focusing on the larger issues relating to terrorist funding activities, networks, illicit terror linked charities, money laundering and FICN smugglings in the South Asian region.
Mr. Roul can be reached by e-mail at firstname.lastname@example.org
By David Nordell<?xml:namespace prefix = "o" />
International counter-terrorism expert Brian Jenkins published an article a few days ago under the title “How do we know if security measures work against terrorists?” in the online publication Inside Science Minds. In it, he explains in broad terms the financial cost of counter-terrorism measures – the US Department of Homeland Security alone spends $200 billion a year – and correctly points out that the level of international terrorism against US targets has dropped very significantly, from 50-60 attacks a year during the 1970s, through the few but very bloody attacks of September 11, to only four attacks in 2013, for a loss of only 18 lives.
Jenkins, with whom I had the privilege of working in an international workshop on economic terrorism a few years ago, makes a convincing case with these numbers that the USA, at least, is safer against terrorism now than in the past; and there are similar numbers to show good results for other Western countries that have been the targets of Islamic and other transnational terrorism.
However, he also correctly points out that although we know that all the security measures to which we have become accustomed do work, we don’t really know which ones matter most. As he puts it, in making the comparison between ordinary crime and terrorism, “Terrorist attacks differ from ordinary crimes in important ways. Despite an increase in the volume of terrorism worldwide, terrorist attacks remain statistically rare events. Unlike bank robbers, who go where the money is, terrorists can attack anything, anywhere, any time. Statisticians treat terrorist attacks as random events.”
“Terrorists can avoid security by attacking soft targets, such as public places that are difficult to protect. That terrorists have moved toward softer targets can be interpreted as an indirect indicator that security works. However, it also may reflect the terrorists’ growing determination to kill in quantity, which can be done most easily in crowded public places. Not all terrorist perpetrators worry about being caught in the act, or even about escaping. Even the terrorists’ operational failures cause fear, which is the objective of terrorism.”
Jenkins’ bottom line, which is that we don’t yet have reliable analytical methods to work out which security measures are most effective, let alone cost-effective (also in light of the psychological damage that the threat of terrorism causes to society in general), applies even more when it comes to terror finance.
Why is this? First of all, unlike actual terror attacks, where we have fairly reliable information on how many there are, their cost in human life and suffering, and also how many are foiled by intelligence, law enforcement and technical means, we really don’t know how much money is spent annually on terror finance. Actually, for most countries outside North America, Europe and Israel, we don’t even know how many lives are taken by terrorist action, because of a shortage of reliable information.
Some of our fogginess over the scale of terror finance is a problem of definition: does terror finance include the global cost of dawa, Muslim religious propaganda? Foreign aid given by governments to Palestinian government security and law enforcement bodies, some of whose personnel take part at least part-time in terror attacks against Israel? Government subsidies and tax breaks given in countries such as the UK to Islamic charities and institutions that preach hatred for the West and its values, thus contributing to the desire and motivation to carry out terror attacks? Foreign aid and charitable contributions given to African countries, Pakistan and other states where very considerable sums get diverted either to internal terrorism or to terrorism against the donor states themselves? The cost of running training camps, safe houses and other infrastructure for active terror cells? The cost of guns and explosives? Some terror attacks cost next to nothing: the example of Drummer Lee Rigby, murdered in London on 22nd May 2013, illustrates the absurdity of attempting an accurate analysis, since the knives and hatchet used to kill him cost only a few pounds.
The next methodological problem is that unlike in anti-money laundering, where we can make estimates, or guesses, about the scope of financial crime, and then assert with some confidence that all or most of the proceeds of financial and property crime are then laundered in some form to some beneficiary (including the criminal), we don’t know how much of this ends up financing terror groups. And on top of that, a lot of terror finance comes from honestly earned money that is either donated in good faith to charities that pass it on to terrorist groups, or is extorted from its owners. The new international plague of cyber crime creates a whole new question: we have no idea how much of the proceeds of different cyber crimes, from ‘Nigerian 419’ frauds to large-scale market abuse, is being recycled into the infrastructure of terrorism; and how much of this is controlled by organized crime groups or by nation states and their proxies.
The third problem is the total inconsistency of how terror groups are defined as such. Hizbollah, for example, is a legitimate political party in Lebanon; but it is also a terrorist organization that has attacked civilians in Israel, which is a clear war crime, and is currently engaged in killing civilians in the Syrian civil war. So when is sending Hizbollah money considered terror finance, and when not?
We can not even be reasonably confident about the cost of counter-terror finance measures, whether in the global financial industry or in law enforcement, intelligence and associated legal costs, because these measures are nearly always conflated, both operationally and in totting up the costs, with anti-money laundering, sanctions, anti-corruption and now also FATCA compliance. So when we read that HSBC, or Standard Chartered, or whichever other bank, has been fined some huge amount for non-compliance, or that JP Morgan Chase is taking on thousands of new compliance staff, how much of this should we ascribe to fighting terror finance?
Nor can we be too confident about the effectiveness of these measures. The plot in 2006 to blow up several airliners due to fly from London to the USA was indeed foiled, just in the nick of time, thanks to good luck and good CTF intelligence applied by Britain’s National Terror Finance Investigation Unit in Operation Overt: in that case, we can say clearly that the CTF system actually proved itself as the safeguard that prevented a major terror outrage. There have certainly been other cases where attempts to finance terrorist activity have been interdicted successfully. But much of the time we don’t really know. According to recent reports, Taliban is running out of money. But is this because its narcotics-smuggling activities have been stifled successfully, or because external donors have reached the conclusion that they don’t want to throw good money after bad? In more general terms: how effective is cutting off the money supply at stopping the terrorists, especially now that it has become a fairly low-cost and sometimes self-funding activity? The reality is that more than 100,000 civilians have died in Syria, in what is called a civil war but is in reality mainly a war of terrorism; yet CTF doesn’t appear to have saved many lives.
I don’t claim to know the answers to these questions, although I do think I know what many of the questions are. But it’s actually important for international policy-makers, from the UN’s Counter-Terrorism Executive Directorate and FATF down, and for national authorities, to not only ask them but also try to find some answers, in order to re-examine whether we are doing the right things. If the regulations and their application are not fit for purpose, maybe it doesn’t make sense to impose large fines and massive increases in regulatory compliance expenses on banks for not doing effectively something that doesn’t work well. This is especially true at a time when the world is trying to recover from a global economic crisis and so needs a banking system that is both more liquid and can manage financial risks better. I’m by no means suggesting that banks should be let off the hook for ignoring AML and CTF regulations, as they too often do. But a great deal of unnecessary inconvenience and cost is borne by customers, and a large part of the developing world is being left unbanked, with negative economic consequences, because of a system that needs change.
By David Nordell<?xml:namespace prefix = "o" />
If I have been silent on this blog for the last few months, it is mainly because I have been preoccupied in my work by another plague of the modern world, one that has become much more widespread than kinetic terrorist attacks: cyber attacks.
As is now well understood, cyber – the use of the world’s computer and data communications infrastructure to carry out attacks, whether on other computers and data resources or other forms of critical infrastructure – has become much more pervasive than conventional terrorism, largely because the attackers do need any physical contact with their intended targets or victims, but can operate from a comfortable room at the other end of the world, with very little risk of being identified and even less of being arrested or punished. And, of course, it is even possible, with a skillful attack on a well-selected target, to kill innocent people without needing to risk one’s own life.
There is also no question that cyber espionage – gathering intelligence on potential targets by hacking into relevant data sources, whether password files in financial institutions, schematics of the SCADA systems that control vital industrial processes such as power generation, or engineering data on civil aircraft – can be of tremendous value to terrorist groups, especially more sophisticated ones that want to cause larger-scale damage or mass casualties. The only occasion on which a fatal airliner crash, of Spanair flight 1522 on 20th August 2008, in which 154 people were killed, is reasonably well attributed to cyber attack, was reportedly the result of the airline’s central computer system being infected by malware, although no terrorist group either claimed or was accused of responsibility.
What is also clear is that one of the favourite targets for cyber attackers is the financial system itself: not only the credit card details and account passwords of by now hundreds of millions of individuals and businesses, but also the trading infrastructure for the trillions of dollars that are traded daily in shares, bonds, commodities, foreign exchange and derivatives. And while there are already many thousands, of recorded attacks in which cyber thieves managed to steal money from individual bank and credit card accounts, typically transferring it to accounts opened with false identities in countries such as Lithuania, the Ukraine or Macao, the questions remain open whether – or rather how much – money has been grabbed by cyber criminals from attacks on trading systems, and how, and whether any of this has been done not for personal profit but in order to help finance terrorist activity.
I have already referred to this danger in presentations I gave last year at two conferences on cyber risks in the financial industry, Data Risk Management in Financial Services in London, and the INSS cyber conference in Tel Aviv on Challenges of the Financial Sector. In broad terms, the global investment banking industry is exposed to risk through a whole range of market manipulation by cyber attackers. This includes the theft of sensitive data, whether merger and acquisition plans or details of trading algorithms, the planting of false data in market data feeds or spreadsheets, or of market-sensitive news on Twitter and other social media. And, of course, there is the almost-ubiquitous distributed denial of service attack, DDOS, which is designed to slow down or completely paralyse some part of the bank’s or trading infrastructure’s operations. The most obvious financial damage to the institutions is in the direct loss of business (more typical in retail banking, such as frustrated customers changing banks because of ATMs or even branch banking systems not working). But the more serious danger is to the reputation of the bank or infrastructure provider, and this is where cyber attackers can profit from their attacks: simply put, you knock down some institution’s systems, even for a while, damage its reputation for reliability, and make a profit from having shorted its stock beforehand. And in principle, by creating enough fear, uncertainty and doubt about potential DDOS and other attacks, even without carrying out any real attack, cyber attackers can manipulate the share prices of financial institutions by large enough margins to make a profit.
This theme has now been explored in more detail by a new report from DDOS protection company Prolexic, which analyses several DDOS attacks since the widely publicized Russian cyber operation against Estonia in 2007, although most incidents covered took place since 2011. While the analysis looked only at the direct effects on the institutions and markets affected, rather than the potential for the attackers to profit, one incident stands out in particular: the attack on Saudi Aramco (the company’s name was redacted from the Prolexic report) in August 2012 in which some 30,000 computers were brought down for about a week by hackers who are believed by most cybersecurity analysts to have been Iranian or Iranian-backed.
While the direct damage to Saudi Aramco was expressed in major drops in its ability to deliver oil, the opportunity to profit from market manipulation expressed itself in the market price of crude oil, which spiked up from the week of the attack from $114 to $116/barrel, and shortly afterwards to $117. Even bearing in mind that the price had already risen from about $106 from the beginning of August 2012, this very sudden price spike could have given a reasonable profit to an attacker or accomplice trading on margin. And although there is no evidence (yet) that this actually happened, it is entirely plausible, given the economic sanctions against Iran, that the Iranian interests apparently responsible for the attack would have wished to make some money as well as damaging Saudi interests – money that would also have the advantage of being useable outside Iran itself, such as for terrorist activity, without being blocked by the sanctions regime (the effectiveness of this regime is another question entirely). But to take a more extreme and by no means hypothetical example: if an airliner were once brought down by terrorist attack, something that nearly happened with multiple airliners in mid-2006, the terrorists could not only have the satisfaction of a successful attack, but also the possibility of financing the next attacks by shorting the shares of the airlines involved, which would naturally plummet. And this applies just as much to a cyber attack on the aircraft’s control systems as to a suicide bomber using explosives.
Two clear conclusions arise from this type of risk scenario, conclusions that need to be addressed at the levels of national government, international regulation and individual businesses. The first and more obvious one is that financial institutions and infrastructure providers, as well as other critical national infrastructure providers, need to have much stronger cybersecurity measures in place, and to stress-test them. To some extent this is already happening, especially in the financial industry. National cyber resilience exercises have taken place both in the USA and UK, and the more recent one in the UK, Waking Shark 2, which took place in mid-November 2013, was according to its unclassified public reports, a reasonable success. And, of course, many new cybersecurity technology and service companies have sprung up to try to address the dangers.
Understanding the degree to which cyber criminals and terrorist groups can profit from major cyber attacks, however, is still far from success. Preventing the money from being extracted from the financial system, let alone catching the perpetrators, is even less so, although the police in several countries have had many individual successes in catching the criminals. There are two failures here. One is that the international regulators, led by the Financial Action Task Force, have been glacially slow in improving the regulatory system to take account of money laundering and terrorist financing resulting from cyber operations. In most jurisdictions, there is not even an unambiguous regulatory requirement, backed by criminal sanctions, for financial institutions to report cyber attacks, in the same way as they are obliged to report money laundering activity through the Suspicious Activity Report system.
The other failure is to develop joined-up monitoring and intelligence analysis systems that would, for example, allow any cyber penetrations detected to automatically trigger intensive real-time monitoring of market abuse indicators and unusual transactions, and even to block payments to counterparties that have not been pre-identified and vetted, not on the basis of the essentially dysfunctional black list system, but of white listing.. How this should be done, and its implications for reducing terror financing risks, I am working on both conceptually and in terms of technology implementation, and hope to address these in future postings.
By Rachel Ehrenfeld
Islamic banking is erroneously viewed as an ancient practice. “Neither classical nor medieval Islamic civilization featured banks in the modern sense, let alone ‘Islamic’ banks,” notes Timur Kuran, professor of economics and law at the University of Southern California.
Reports by Islamic banking scholars, the IMF, or the Congressional Research Service do not mention that Islamic banking was first concocted by Muslim Brotherhood founder Hassan al-Banna in the 1920s. The stated goal was to penetrate the Western finance system, corrupting it from within in hopes of creating a parallel system to re-establish a global Islamic empire governed by Islamic law (shariah). Islamic rules of commerce (fiqh al-muamalat) forbid interest (riba) and investing in a prohibited (hara’am) enterprise. They also mandate tithes on wealth (zakat). However, the Koran fails to precisely define these concepts. Imams and ayatollahs differ, for example, on whether riba prohibits all interest or only usurious interest.
The first successful Islamic banking experiment was the Mit Ghamr Savings Bank in Egypt in 1963. But five years later, the Egyptian government, which subsidized the bank, shut it down after Muslim-Brotherhood-led demonstrations swamped the country.
In 1963, Malaysia also introduced a limited form of Islamic banking, with establishment of Tabung Haji (Pilgrim’s Fund) that served only as a savings institution, to help Muslims save towards their pilgrimage to Mecca (Hajj).
Ten yerrs later, growing oil fortunes in the Middle East, lead the Organization of the Islamic Conference’s (OIC) to establish the Islamic Development Bank (IDB) “in accordance with the principles of the shariah,” as prescribed by the MB-and to launch the fast-growing petrodollar-based Islamic financing market. The IDB, more a development than a commercial bank, was established largely “to promote Islamic banking worldwide.” Consequently, the IDB founded the Bahrain-registered and -based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Other regulatory organizations followed.
Finally, the most crucial element that helped persuade reluctant Muslims to use Islamic banks, the invention of “Islamic banking windows,” is never noted in reports documenting the development of Islamic banking. This happened in 1993, when Anwar Ibrahim, then Malaysia’s finance minister, helped to introduce the newly invented “Islamic Banking windows” into conventional banks. This measure, which familiarized clientele with and built confidence in the unknown Islamic banking system, proved central to the development of the global Islamic finance industry.
January 30, 2014
Origins and Controversy
A Rising Asset Class
Sukuk: A Global Trajectory
Islamic Finance in the United States
Global Islamic financial assets have soared from less than $600 billion in 2007 to more than $1.3 trillion in 2012, an expansion rooted in the growing pool of financial assets in Muslim-majority countries driven by consumer demand for products that comply with religious codes. Assets are concentrated in Muslim countries of the Middle East and Southeast Asia, but the sector appears poised to enter Western markets and complement conventional financing. Prime Minister David Cameron announced in 2013 that the United Kingdom will issue a £200 million ($327 million) Islamic bond, orsukuk, making it the first non-Muslim country to tap into Islamic financing. Companies in the United States are also considering Islamic finance to fund business ventures and infrastructure projects. Demand for new Islamic investments is expected to outstrip supply by as much as $100 billion by 2015, an imbalance that could translate to much-needed liquidity in some tight markets. But the industry remains small and will need to expand considerably to have a significant impact on global financial markets.
Origins and Controversy
Muslims invested in and stored financial assets according to their religious principles for fourteen centuries before the emergence of the first Islamic financial institution, Dubai Islamic Bank, in 1975. (Conventional finance has also considered ethics in its centuries of development, which can be observed today in corporate social responsibility investments.) Hundreds of Islamic banks have been launched since 1975, with millions of Muslims using Islamic finance products from Malaysia to Michigan. Some countries-including Malaysia, the United Arab Emirates, Iran, and Saudi Arabia-actively foster the nascent and growing industry.
Reinterpreted medieval Islamic contract laws form the basic structures of the new asset class that doesn’t contravene sharia, or Islamic law. Sharia-compliant financial instruments can’t pay or collect interest, due to Islam’s proscription of usury; Islamic investments also can’t be associated with alcohol, pork, gambling, pornography, or other Muslim prohibitions. Risk-sharing and profit-sharing must be structured into contracts, investments should enhance society, and financing should be backed by assets. Islamic banks have developed tools to address these constraints and perform their basic function: to take deposits, invest them, and profit from the spread.
One of the basic building blocks of Islamic finance is murabaha, where “two parties agree to trade at a price equal to the cost plus mark-up or profit,” writes Rice University professorMahmoud Amin El-Gamal. This allows, for example, a bank to purchase an asset, like a car, for $10,000 and sell it to its customer for $11,000 in installments over a year. In conventional finance, the bank lends money at a certain interest rate using the car as collateral, while the murabahatransaction the bank purchases the goods and then sells it to its customer. Other financial instruments and tools such asijarah (leasing), mudarabah (profit sharing, usually between investors and managers), musharakah (joint venture), sukuk(Islamic bonds), and takaful (Islamic insurance), allow the development of Islamic financial products that span retail and corporate banking, private equity, and insurance.
This financial innovation has created an asset class that caters to more than a billion Muslims worldwide and is fueled by rising incomes in many Muslim countries, from Persian Gulf oil exporters to dynamic Muslim economies in Southeast Asia. Muslims concerned that their money would be involved in un-Islamic activities at conventional banks can head to Islamic banks in more than fifty countries to open checking and savings accounts, apply for credit cards, finance cars and homes, and purchase insurance.
A major principle in Islamic finance is to have a direct link between the real and financial economy. Sharia boards-oversight committees made up of experts in Islamic finance who are paid by banks to sign off on products and practices-have been lenient at times with some structures, but hold firm to the principle that financing must benefit the real economy. Ibrahim Warde, a professor of international business at Tufts University, says some bankers were annoyed with their sharia boards for forbidding Islamic banks from following the lead of conventional banks during the run-up to the global financial crisis. “Sharia boards acted as a safeguard against the excess of conventional finance,” he says.
Islamic finance has long faced the criticism that it’s just mimicking the broader market. Even the main premise of Islamic finance, that interest is forbidden in sharia, isn’t a settled issue. Muhammad Sayyid Tantawy, then the grand mufti of Egypt, issued a famous fatwa in 1989 that differentiated between riba (usury), defined in sharia as excessive interest similar to loan sharking and predatory lending, and interest used in conventional banking. Analysts say his conclusion that modern finance doesn’t contravene sharia, as well as the collapse of several Islamic saving schemes in Egypt in the 1980s, are the reasons why Egypt’s large Muslim population has lagged in adopting Islamic finance.
Many bankers in the Middle East are also skeptical of Islamic finance. Hassan Heikal, a prominent Egyptian banker who founded EFG Hermes, one of the region’s largest investment banks, has been a vocal critic of the industry. In 2006, he dismissed sukuk as “conventional bonds that are coated with an Islamic shell.”
When Islamic banks appeared in the 1970s, the goal was to create an alternative financial system, but pragmatism set in and the industry developed products similar to those used in conventional finance, Warde says. “The criticism of the industry is valid, up to a point,” he adds. That point was clear when Islamic banks avoided subprime lending and trade in exotic derivatives, demonstrating that the industry wasn’t blindly following conventional finance.
The debate over the origins and basic principles of Islamic finance has waned in recent years, and the focus has shifted to claiming a stake in the growing market. Even funds managed by EFG Hermes have made sharia-compliant investments.
A Rising Asset Class
Assets held by Islamic banks continue to grow by more than 15 percent per year, and analysts at Standard & Poor’s predict the potential size of Islamic financial markets could reach several trillion dollars [PDF]. Banks in the Persian Gulf and Malaysia have become flush with sharia-compliant deposits and are scouring for regional and international opportunities to deploy them in Islamic financial instruments to diversify risk and improve yields.
Islamic banks have played an important role in financing infrastructure projects in Muslim countries, and have been a source of funding for foreign companies and joint ventures operating in the Middle East and Asia. International banks such as HSBC, Crédit Agricole, and Standard Chartered have established sharia-compliant banking divisions, and advised corporations and governments on issuing sukuk and other financial products. Islamic banks have popped up in some Western countries, such as the Kuwaiti-backed Bank of London and the Middle East (BLME), which is sharia-compliant down to the lease contracts on its photocopy machines. This geographic expansion is expected to continue both to cater to Muslim consumers and to find new investment opportunities for large, cash-rich Islamic banks in the Middle East and Asia.
Sukuk: A Global Trajectory
One of the most promising developments in Islamic finance that has wide applications outside Muslim countries are sukuk, or Islamic bonds. Sukuk (plural of sakk) are capital market securities issued by companies or countries. They act like bonds, delivering a stream of payments to investors until maturity. Sukuk deals typically are backed by an underlying physical asset like a power plant, oil field, or real estate, a structure that complies with sharia and may reduce the risks that investors face in the event of a default. However, in many cases, Islamic bonds don’t confer ownership of an asset to their holders, which caused some confusion among investors when some sukuk defaulted in 2009 and 2010.
The global sukuk market has doubled since 2007, driven mostly by issuances in Malaysia, which had $170 billion in outstanding sukuk and represented 68 percent of total global sukuk at the end of 2012, according to the 2013 Islamic Finance Development Report published by the Islamic Development Bank and Thomson Reuters. Countries such as Saudi Arabia, Qatar, the United Arab Emirates, and Indonesia comprise the rest of the market.
Other countries have expressed interest in tapping demand for sukuk by issuing their own sovereign and corporate paper. The United Kingdom plans to be the first Western country to issue a sovereign Islamic bond, while Singapore, Gambia, Senegal, South Africa, and Nigeria are planning to expand the footprint of Islamic securities in 2014. Hong Kong is also considering sukuk in 2014.
The UK government’s proposal to issue Islamic sukuk was “driven primarily by a senior Muslim member of the government, Baroness Sayeeda Warsi, who has made a compelling argument that the UK can compete with Malaysia and the Gulf in drawing sharia-compliant investors,” says Ed Husain, CFR’s senior fellow for Middle Eastern Studies. A British bond may spur other Western governments to follow suit. In addition to opening a channel to a new pool of capital, a British bond “can send a message to Muslim populations in the West and Muslim countries in the East that European governments are not hostile to Islam and Muslims,” Husain adds.
Sukuk and Islamic banking won’t have a dramatic impact on global finance for the foreseeable future: Total Islamic financial assets are less than half of the assets controlled by one major Western bank, JPMorgan Chase. But its expansion in the West can have political benefits and “help the nascent industry become more professional, standardized, and creative,” Husain says.
Islamic Finance in the United States
Sharia-compliant products, mainly personal home mortgages, have been available in the United States since at least 2002, when Guidance of Reston, Virginia, was established. (These financial institutions were prudent with their lending and didn’t tap the subprime borrowers.) But only a few billion dollars of Islamic home financing is provided each year, a tiny fraction of the multitrillion dollar conventional mortgage industry. Some U.S. companies with global operations have issued sukuk, such as General Electric’s $500 million offering in 2009.
As the sharia-compliant asset pool swells in the Middle East and Asia, a mismatch has emerged between available capital and supply of investments in the region, prompting many banks and investors to look outside the Islamic world for returns. Bankers say investors are eyeing opportunities in the United States in a variety of sectors such as infrastructure, oil and gas, and real estate.
Paolo Curiel and Ibrahim Mardam-Bey, two executives atTaylor-DeJongh, a Washington, DC-based investment bank that has brokered sharia-compliant deals in the United States, note that Islamic banks in the United Arab Emirates have deployed only 80 percent of their deposits, just one example of the capital glut in Islamic financial institutions. These institutions have historically allocated international investments into real estate but are now looking to diversify into new sectors, which could provide new liquidity to small and medium-sized companies in the United States. Infrastructure sukuk similar to those issued in Saudi Arabia and Malaysia are also seen as a potential source for funding in the United States [PDF].
Some U.S. financial institutions and lawmakers have expressed concern that Islamic banking transactions may deliver funds to terrorists. However, experts have testified in Congress that there is no evidence to prove that Islamic banks are more prone to facilitating transactions for money launderers and terrorist financiers than other banks. A Congressional Research Service report on the industry notes that there may be a “conflation of Islamic finance with hawala [PDF],” which is an informal, trust-based money transfer system that has been used for centuries in the Middle East and has been associated with terrorist financing in recent decades.
Islamic banks and investment firms are regulated by finance ministries and central banks that also oversee conventional banks in Muslim countries. The existing financial laws and regulations are viewed to be broad enough to accommodate the industry, according to the CRS report. Standards for the industry are mostly set by the Islamic Financial Service Board (IFSB) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), two bodies that include representatives from regulatory authorities. But different interpretations of shariaand regulatory practices across countries poses challenges to standardizing the industry.
• This Congressional Research Service report provides a broad overview of Islamic finance and its policy implications for the United States.
• This 2012 IMF Working Paper explains the differences between Islamic and conventional financial institutions in Malaysia.
• The New York Times reports on sharia-compliant investment opportunities in the United States.
- See more at: http://acdemocracy.org/what-they-dont-tell-you-about-islamic-banking